Finning upgraded after update

Finning International Inc. was upgraded to Outperform from Market Perform at Raymond James after the company disclosed that its enterprise resource planning (ERP) system implementation in Canada and a five-week strike this summer will cost 20¢ to 25¢ of earnings per share in the third quarter.

Following the launch of its new ERP system on July 4, Finning said it experienced implementation issues affecting parts supply, warehousing and distribution operations.

“Our impression is that, although many customers may still be suffering from this transition, most of the root (i.e. technical and functional) causes of the problems are now under control,” Raymond James analyst Ben Cherniavsky said in a note to clients.

“The company thus feels strongly that by the end of the year parts flow should be back to normal (although they concede that it may take longer than that to fully recover any lost goodwill with customers).”

Assuming that it is the case, Mr. Cherniavsky sees a buying opportunity in Finning shares. Part of this has to do with the reduced headline risk now that the market has digested the bad news.

However, the analyst said the more important factor is valuation. His estimate suggest Finning shares are trading at a P/E multiple of 10.0x, near the lowest valuation seen in ten years.

“There is no doubt that the company still faces a lot of IT-related challenges over the next few quarters, but they appear to be amply prices into the stock,” Mr. Cherniavsky said.

His price target on the stock is $25, representing upside of roughly 25%.

Investing Videos

Promoted by iShares by Blackrock

Active Investor was produced by Postmedia's advertising department in collaboration with iShares by BlackRock to promote awareness of this topic for commercial purposes. Postmedia's editorial departments had no involvement in the creation of this content.

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.